Asset classes

Process Steps: Our process is iterative, and uses elements of both top-down and bottom-up analysis.

Our process is robust and repeatable, and uses elements of both top-down and bottom-up analysis. Generally, investment decisions are made on the basis of a combination of the following steps.

For more information on the investment process used for specific classes of bond, use this link to ‘Our capabilities’.

Strategic analysis: our fund management team analyses macro-economic fundamentals, trends in credit quality, investors’ risk appetite and supply and demand, within and across markets. Next, our fund managers integrate their views on ‘big picture’ issues, their knowledge of market technicals and client guidelines, to produce a consolidated view. They implement this in portfolio construction in accordance with the client’s investment objectives and risk tolerance level.

Asset allocation: The 'house' asset allocation strategy for bonds is determined by our Asset Allocation Committee although lead fund managers ultimately have responsibility for decisions relating to their mandates. The Asset Allocation Committee meets fortnightly, is chaired by Mark Wauton, and comprises the heads of each of our fixed income teams.

Quantitative analysis: we are distinguished by our dedicated fixed income quant team. The remit of our quantitative analysts is to develop new models for deployment in the investment process. In addition, they focus on improving our risk analytic systems in conjunction with our Risk Management group. In terms of alpha generation, we use a scorecard-based approach to ‘score’ trades, which are assessed on three axes; value, cyclical and momentum and timing. The drivers for each axis are constructed following discussions with fund managers and empirical testing by the quant team.

Validation: relative-value is vigorously debated among our fund managers, who bring critical perspective given their proximity to the markets and their inter-sector focus. Our credit and equity analysts share information on Multex (Multi Exchange Order Routing system) while the US-based credit team provides us with insight into US issuers. Their linkages to our London office are central to our delivery of solutions across world time zones.

Portfolio construction: Portfolio recommendations bring together the research conducted by our analysts and output from quantitative models, overlaid with qualitative manager views. We believe that the dialogue between our fund managers and analysts generates superior bond selection ideas, which are then implemented across our portfolios, subject to clients’ investment guidelines.  

Analytical Dimensions